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LIC Housing Finance share price tanks on news of possible IDBI merger, management denies reports

Kshitij Bhargava

Share price of LIC Housing Finance tanked 12 per cent during the early hours of trade touching a price of Rs 364.60 down from its opening price of Rs 399. LIC Housing Finance shares felt the heat after The Business Standard reported that LIC Housing Finance could be merged with IDBI Bank. The report was refused by the leadership of LIC Housing Finance in an interview with CNBC TV18. A merger with IDBI Bank could have had a negative impact on the lender, according to brokerage firm Sharekhan.

As per media reports, Life Insurance Corporation of India may merge LIC Housing Fin with IDBI Bank; Sentimentally negative for LIC Housing Finance as IDBI Bank has high GNPAs of ~28.7% and accumulated net losses," said Sharekhan in a tweet on Monday morning. LIC has a 51 per cent stake in IDBI Bank. In her Budget speech, Finance Minister Nirmala Sitharaman had announced that the government will divest its remaining stake in IDBI bank via stock exchanges. 

Separately, LIC Housing Finance has identified 14 real estate projects which could be eligible for resolution under the government's Rs 25,000-crore alternate investment fund (AIF) for reviving stalled residential projects. The mortgage lender's exposure to these projects is about Rs 1,100 crore, said managing director and chief executive officer Siddhartha Mohanty on Friday. Mohanty added that although the projects are eligible for the AIF, the process might take some time as project completion is not an overnight job. LIC Housing Finance and other housing finance companies also suffered a blow when clarity emerged that RBI's relaxation of real estate loan repayment rules was applicable to only scheduled commercial banks and small finance banks, but not to housing finance companies. 

Domestic equity market benchmarks Sensex and Nifty pared opening gains and was trading flat to negative on Monday taking cues from their Asian peers amid rising death toll from coronavirus outbreak in China.  S&P BSE Sensex was trading flat at 41,204 points, while the broader Nifty 50 index was trading at 12,095, down 18 points or 0.15 per cent.